by Mark Buitenhek, Global Head of Transaction Services, Products and Channels, ING Commercial Banking
What could you achieve in six months? You can study for a qualification – but few take less than nine or ten months. You could save for a holiday or a car – although in only six months, it may not be the world cruise or the sports car you may have dreamt of. Whatever you are trying to achieve, six months is not a long time. So why then, with less than six months until the Single Euro Payments Area (SEPA) deadline on 1 February 2014, are so many corporate treasurers and finance managers reluctant to start their migration projects?
The impact on your company if you fail to migrate by the deadline could be substantial. If critical payments fail treasury settlements, interest payments, salaries and supplier payments, the financial and reputational damage will be substantial. The same applies if your customers, have not migrated and therefore your collections are interrupted. A core responsibility of treasurers and finance managers is to manage risk, and the impending SEPA deadline represents not only a significant compliance risk, but also a major financial risk. It is not an optional project, it is mandatory, and it must happen now.
Some treasurers may believe – or hope - that the deadline may be postponed. It will not. As the European Payments Council (EPC) has stressed repeatedly: there is no Plan B, only Plan A. Others also believe that their banks will perform the migration on their customers’ behalf. Undoubtedly, given the timescales involved, many companies will need to use conversion services offered by their bank or a third party, but the quality and reliability of these services is very variable, from back-up or stop-gap solutions through to long-term, high-quality services. However, there are still cost and resource implications to implementing these services and treasurers need to take every measure possible to prevent interruption or failure in their payments and collections systems and processes.
Companies in some countries are further advanced in their preparations than others. Countries such as Finland, Belgium, Greece, Spain and France are amongst the forerunners, with 100% of electronic flows in Finland and Greece taking place via SEPA Credit Transfers (SCT), nearly 65% in Belgium, 52% in Spain and 45% in France (source: European Central Bank, Q2, 2013). In some cases, such as Spain, adoption has been boosted by government initiatives, with early adoption by public sector organisations. In contrast, although the figures are now rising, only 27% of credit transfers in Netherlands, less than 11% in Germany and 11% in Ireland are SCT transactions. When it comes to SEPA Direct Debits (SDD) the picture is bleaker still, with less than 5% of direct debits using the SDD instrument, a figure boosted to stronger, although still very modest, take up in Belgium and Austria (the front runners for SDD are Greece and Slovenia). The scale of the undertaking is clear at a national level, but these statistics solely reflect the efforts of individual organisations.
While the scale and scope of a SEPA migration project will vary according to the geographic reach, size and complexity of each organisation, it remains a major undertaking, typically taking at least six to nine months to complete. Now that this time is no longer available, companies must channel their resources into compliance, and then seek to leverage the benefits that SEPA offers as a second project phase. This applies not only to businesses with cross-border payments and collections: every company operating in the Eurozone, even in just one country, will have to migrate by the end date. While many larger multinational corporations have already achieved considerable progress in their SCT migration plans, there is still a great deal of work to be done on SDD. Domestic businesses or smaller companies with operations in a limited number of countries often still have the bulk of the migration project ahead of them.